Readers' comments

Here is some recent news that might be more important concerning the economy of Hungary, than the article about Julia Kiraly :

Eurostat records 1.9% of GDP deficit in Hungary in 2012

Eurostat, the statistics office of the European Union, has published its government deficit figures for the euro area and the EU27, which showed 1.9% of GDP shortfall for Hungary for 2012. This is below the much better than expected gap estimated by the Hungarian government. With this performance Hungary ranks 7th (tied with Finland) among the 27 member states of the EU.

..."poring over the promotions and demotions like Cold War Kremlinologists who analysed the photographs of the Soviet leaders on May Day Parades..."
Had to get that in there somehow, no matter how arbitrary and inappropriate, right? Are such sentences really worthy of a newspaper that wants to be respected as a serious publication?

What sensational news! Another bad apple has fallen of the shelf, big deal eh? Her predictable adieu has caused waves only in the Jacuzzis of Shylocks and socialist robber barons gazing at their navels and worrying themselves to death over the state of the Hungarian democracy.
Anyway, let's wish this lady good luck! Pulling strings, she will soon land a plum job, no doubt.

And that's what you get, when you elect populists. Soon there will be no diffrence between the Hungarian government and public officials and the Soviet Union ones. Since Obran's election Hungary brakes all the rules of capitalism and free economy bringing fear and risk to investors commited in the whole CEE region. And moreover it complains on the EU (if you don't like it - exit the Union). Hungarians please vote in a more responsible manner next time! For the sake of yourselves and all the Europe!

What have we got? That one member of the former failed regime resigned a couple monthes before the expiration of her mandate? Anyway, thanks for the instruction! Next time we will vote for the corrupt socialists and EU will be delighted.

What have we got? The theatrical resignation of an expert who is coupable in the swiss franc crisis in Hungary (among others)? This is some months before the expiration of her mandate? Never bigger problem!
Anyway, thanks for the instruction! Next time will we vote for the corrupt socialists and EU will be delighted!

FIDESZ a populist party? That's one of the most ignorant things I have read so far in this comments section. Not even worth to argue about.

And what has capitalism brought us so far? Privatization of our (the people's) assets? Selling MALEV for 800.000 Euro's to some Russian weirdo (MALEV is now bankrupt)? Having an "independent" central bank? Are you totally oblivious to the central banking scam of the 20th century?

There is no independent central bank anywhere in the world. They are only independent from government, but you can be sure they are running an agenda which is not their own or in the interest of the nation per se.

FIDESZ has done something that would cure many monetary issues if done by more countries. Don't hate Orban because your own leaders are to afraid and ignorant to stand up against the central banking cartels. He made our central bank to operate in the interest of the Hungarian nation, rather then some vague EU agenda.

"The meeting room, where bank officials once discussed policy options, has now been handed to one of Mr Matolcsy’s closest aides. Bank officials said there are other suitable rooms for discussions."

Is this now an analysis?

"Insiders complain of a climate of fear, where the old guard and non-government loyalists are sidelined or fired."

In this form, this sentence has no information content. Please compare to the other times the head of the National Bank changed. Both non-socialist heads of the National bank have been constantly attacked by the socialists during their government. One of them even resigned at the change of the government ...

I think, the article has interesting facts for the reader, even if the political orientation is clear. What I do not understand is this gossipy character of the article and how people making their hands quite dirty in working with the dilettant 2002-2010 government could appear as sort of martyrs. Of course, these type of people will not say that they like the change of the government. But this has no information content.

“Taking all of this into account, I can see an increasing likelihood that decisions could be made that are not well-founded, and (which are) mistaken, for which I do not wish to take any responsibility.”

Ha-ha-ha, there is no bigger dillettant and bolshevik, than Matolcsy (and his boss, Viktor Orban) with his stealing and wasting peoples savings from private pension funds with no positive effect - neither did have any positive effect of the flat (one) rate personal income tax which essentially reduced the net wages of average and lower income employees and increased the net wages of high income people. It was intended to boost internal consumption - what a dilettant vision! The rich may only spend more on luxury goods (high import content) or spend abroad - entailing no domestic economic boosting!
The bad thing is that Matolcsy fires not only Julia Király - it would not matter much - but also a good analyst team from the National Bank which could make him face his crazyness - these guys studied at universities like MIT - ha ha ha too primitive to grasp Matolcsy's crazy genius - unorthodoxy.

Dear qKhHsJW9V8
I would like to react to this part of your your comment:
"stealing and wasting peoples savings from private pension funds"
This is a quite transparent misinterpretation of the facts.
In reality, let us see what happened. The soclib government (2002-2010) put part of the regular payments of the people into the hands of his friends. These were the _obligatory_ private pension funds. Obligatory means that the people did not have a choice.
Then, large part of this money disappeared (they put it on the stock market) and additionally, increased the budget deficit, which could reach I think almost 10% during the soclib times. Now Hungary has to have so low budget deficit partly due to this nonsense.
This was the stealing, in the literal sense. The money of the people ended up in the pockets of the socialists and they used it for God knows what. Just a small idea: they were using these large amounts to influence the stockmarket in the direction they wanted, not considering that the funds loose money. Note that just before the crisis they made a law to increase the percentage of stocks in these funds.
Moving these disfunctional "private" pension funds back to the state is not stealing. Tell me, how Orban can have money from this in his pocket? He cannot ...

"A year ago, when we first saw the rage of the tornado, we said: our market, a belt of calm, will not be directly affected - but its side-wind will reach us. We said the domestic financial system had no direct exposure, but even this market is an organic part of the global financial markets. Therefore, if significant changes take place there, we will also feel its effects, primarily in the disappearance of the "cheap funding" financiang our economic growth. The events of the last year have confirmed our hypothesis of the time: the domestic banking sector proved to be strong and resilient, the storm has only broken into the domestic financial market to a limited degree. What we have sensed, and what we must learn to live with, is that risk-taking has become more expensive. And our economy is judged to be ricky by the world. Due to the economic performance of the last few years, the accummulation of debt, our economy is still vulnerable in the eyes of investors, and therefore, our financing costs have grown more, our exchange rate has been more volatile, our bond market has experienced a more volatile time than many other countries on our level of development. But there is no crisis of confidence in the banking system, on the banking markets - and this is reassuring.

This banking system is strong and shock-resistant today. Of course, the side-wind of the tornado may cause newer and newer shocks. But we know its nature, its working mechanism, we know where and when to intervene effectively. Together with the large central banks and authorities, the last year has been the year of learning and preparation for all of us. Maybe it is exactly now, on the fourth notable peak of this year-long turbulent period that we feel something changing: our currency fluctuates less, our credit default rate increases less, so we may not now be among the most vulnerable any longer. We can't expect a direct, forceful effect at this time. But the strenght of the side-wind may yet prove strong: credit will not become cheaper, and we will have no great surplus of money."
-- Julia Kiraly: The side-wind of the tornado. Nepszabadsag, 04 October 2008http://www.nol.hu/lap/gazdasag/lap-20081003-20081003-51

On the 9th of October, Andras Simor, the president of the Hungarian National Bank, phoned to the IMF, reporting that "all Hell had broken loose" on the markets. The gust of air characterised by Julia Kiraly as a "side-wind", powerless to shake Hungary's "strong and shock-resistant" banking system, had capsised the vessel like a child's toy.

The National Bank's attempts to assemble a package to calm the markets in this "belt of calm" amounted to nothing. On the 6th of November, the IMF and the European Commission a joint loan package to Hungary (this package has been set to be paid off during the 2010-2014 period, very coincidentally the term of the current government). Hungary then underwent the largest recession since 1991, right after the fall of communism. Debt increased massively, to 83.9% of the GDP by mid-2010. The banking sector, which had flooded the consumer market with toxic foreign currency-denominated debt, now undertook massive deleveraging, particularly in the enterprise business (yes, indeed, years before the much-maligned 'bank tax').

Ms. Kiraly and Mr. Simor stayed in their jobs.

I wish Ms. Kiraly all the best, and hope she proves to be better at her next job. She is, after all, known as an efficient operator, and she is an Economist favourite.

Why should poor Hungarian taxpayers bail out their upper middle class (the ones with foreign currency loans)?
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When high income households (the ones with the collateral & income) take out big foreign currency loans to invest in housing or business, it is right that they suffer the risk (any if it comes to default, so be it - working class Hungarians shouldn't be expected to foot the bill when investments go bad).
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That said, the Hungarian central bank does have to accept a little bit of culpability here. The Hungarian forint is Europe's most volatile currency. The Czech Republic, Poland, Denmark, Romania & Bulgaria all have very high penetration of euro denominated credit; fewer borrowers have had problems, in part thanks to much more stable currencies.

The forint against the euro has oscillated with high frequency volatility in a wide band plus or minus 5.5% around its average in the past year, and with a strong depreciating trend over the past two years.
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That is weird. Most European currencies (including the Israeli shekel, Turkish lira and Russian rouble) trace consistently within a very tight band of the euro. It's clear that the Hungarian central bank neither pursues currency exchange rate stability nor domestic price stability nor achieves any clear domestic macroeconomic targets - the forint is just messy.
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Hungary could certainly benefit from democratic right of center politics, and a coherent macroeconomic policy. Fidesz, sadly, makes Hungary look more like Ukraine every day (oligarchs plundering, attacks on the press, even the central bank now providing interest free loans to politically connected persons & businesses...).

In wonder where you got the idea that it is the upper-middle class that got indebted with foreign currency loans. To take an example, it is the market of cheap cars that has collapsed after things went wrong.

But whatever, guys like you continue to bark up the tree as usual (what attacks on press freedom?) and TE writes about this non-story (good riddance I say) yet did not report about the radical policy changes themselves - nor (back then) the idocity of the former socialist government.

The double standards of this publication is getting to the point of ridiculous (and unfornately this is what those foreigners are reading who are probably trading HUF on the forex market).

The average person in Budapest might (might just) drive a car. The average Hungarian does not. And the far greater volume of euro-denominated credit did not go to car buyers - it went to rich households (buying new housing) and to businesses (investment finance). And in every case, surely the investor should assume the risk of their investment, rather than Hungarian taxpayers?
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Hungary now has a government appointed commission with a duty to monitor all media activity, and to impose fines. That is a very very bad situation. However much Fidesz rhetoric there is about "we still have a free press", there is now a system in place in which the government has discretionary influence over which cases get prosecuted, creating a systemic bias towards self censorship.
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I'm sure you'll give excuses: "it's about combating libel", "it's about eliminating hate speech", "it's about ensuring newspapers retract false statements" or whatever. And yet, this hasn't been implemented through minimal regulation and independent courts. There is horrific potential for this to be abused, and the more cynical among us suspect that Fidesz designed this precisely to abuse and manipulate the press.
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Hungary deserves better.

Do you think those buying a car for less than 10000 EUR can be considered upper middle class? There are some 2 million cars on the road, which means most households have one.
Sorry Sir, this assessment is not true. Surely those taking out the loans must bear a portion of their burden (they do, actually), but why would anyone expect an average bloke to understand the risks involved? The National Bank bears a great responsibility in:
- setting the rates so high that lending must have gone through foreign currencies (it is now being proved, that it was not only unnecessary, but outright daylight robbery)
- not setting off the alarm, that it will end in tears

When reading to various online portals, do you get a sense of self-censorship? Hell, TE has stricter rules* than those of Hungary.

* In one case dared to link the newest fiction of ALB to this page, which is about the 3rd Reich surviving in -where else- Budapest - good mindset for a Hungarian correspondent to start with nevertheless.

So far all the gloomy pictures about both the economy and freedom proved false - if something it exposed the double standards and hypocrisy of Brussels...

By World Bank numbers, 345 cars per thousand people. The average adult in Hungary does not have a car. A transfer from taxpayers to those with significant euro denominated loans is a net transfer from poorer people to richer people; and it also rewards behavior that you clearly consider to have been reckless.
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Certainly, Hungarian regulators and Central bank should have handled this better. Either (1) by limiting exposure to foreign currency loans, (2) by setting a currency stability objective in recognition of exposure to such loans or (3) by ensuring sufficient collateral and ensuring adequate default resolution mechanisms.
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But really, it would have been much better (for Hungarians) to have followed the Slovakian route (where wages are now higher than in Hungary, and GDP growth is far more resilient too).
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I don't speak for Brussels.
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But I do feel really uneasy about the concentration of political power in Hungary - pluralism and separation of powers is the essential if we want to avoid a death spiral of corruption and abuse of power. I haven't heard many accusations of extensive high level corruption or active media censorship in Hungary - and nor do I make them. But you have to realize that removing the institutional checks & balances (and filling every regulatory body with political supporters) suggests the worst. There's no need for it; it's imprudent; it suggests the worst.
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Fidesz, like a democratic political party, should stick to improving Hungary's legal framework & institutional design - instead it seeks to *become* the institutions. Why?
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This isn't double standards. There's no example of power concentration like this in any other developed country (except Singapore & Hong Kong).

"The Czech Republic, Poland, Denmark, Romania & Bulgaria all have very high penetration of euro denominated credit"

The problem is not with credit in euro. The problem is with the indebtedness in Swiss Frank. This has nothing to do to how the Hungarian Forint behaved with respect to the Euro.

10% of the households were indebted in Swiss Frank. The low interest loans in Forint of the previous 1998-2002 government have been stopped and the Swiss Frank loans were pushed through. Many times, you could not buy a car for cash or for a forint loan, only for a Swiss Frank loan.

You can guess what was the motivation here.

Thus, again, your analysis about the forint-euro exchange rate is misleading. The Swiss Frank got so much more expensive both in Euro and in Forint, that the changes of the Forint-Euro exchange rate almost do not matter.

"The Czech Republic, Poland, Denmark, Romania & Bulgaria all have very high penetration of euro denominated credit"

What are your sources?

Both households and corporations in the Czech R. have very low share of foreign currency indebtedness for the simple reason that the Czech National Bank basically copied steps of ECB which resulted in negligible differences in interest rates. Hungarian, Polish, etc. national banks decided for much higher interest rates. Therefore commercial banks in those countries were active in offering foreign-currency denominated loans to large number of common customers (not only extra solvent) with justification that they borrow for much lower interest rate but omitted to remind of the exchange rate risk, which unfortunately, fully struck with beginning of the current global financial turmoil that lead to loss of trust in Central European currencies by global investors (partially reverted back several years later but that is long enough to cause troubles to debtors with repayments).

Denmark and Bulgaria avoided this risk because they have their currencies pegged to Euro. This again shows that Euro (or at least fixed exchange rate or copying ECB decisions) can stabilize economies rather than destabilize as Euro-bashers try to make us believe.